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Should the U.S. Energy Future Depend on Cheap Solar Imports?

Geoffrey Styles's picture
GSW Strategy Group, LLC

Geoffrey Styles is Managing Director of GSW Strategy Group, LLC, an energy and environmental strategy consulting firm. Since 2002 he has served as a consultant and advisor, helping organizations...

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The administration’s decision on whether to impose a tariff or other fee on US imports of solar equipment from China raises serious concerns. The right choice in this case is less obvious than suggested by the jobs and free-trade arguments from the main US solar trade association (SEIA) or the Wall St. Journal’s editorial page. Solar power generates less than 2% of US electricity today. However, if it is to grow as experts forecast and advocates claim is essential, then considerations such as long-term energy security can’t be ignored, while near-term job losses from a new tariff would be more than offset by subsequent growth.

Last October the US International Trade Commission issued its recommendations in favor of the complaint by two US manufacturers of solar panel components. I usually favor low tariffs and open access, especially when the markets in question are functioning smoothly and the principal impacts from trade are the result of “comparative advantage” in production or extraction between countries. However, there is little about the market for solar equipment, including the photovoltaic (PV) cells and modules at issue here, that qualifies as free.

The production and deployment of solar energy hardware has depended since its inception, and from one end of its value chain to the other, on significant government interventions. In the case of China-based PV manufacturing, these have included low-interest government loans, preferential access to land, and minimal environmental regulations. China-based PV manufacturers were also able to take advantage of extravagantly generous European solar subsidies in the 2000s to scale up their output, drive down their costs, and ultimately send much of the EU’s solar manufacturing industry into bankruptcy.

On the US end, both solar manufacturing and deployment (installation) have benefited greatly from federal tax credits, cash grants from the US Treasury, and a web of state quotas for aggressively increasing utilization of renewable energy sources. Justified on grounds of energy security, “green jobs”, and climate change mitigation, these measures have strongly promoted solar power and  delivered an extraordinary 68% compound annual growth rate in US solar installations since 2006. On a per-unit-of-energy basis, these supports are also at least an order of magnitude more valuable to the solar industry than the federal tax benefits received by the oil and gas industry.

One of the factors that makes this decision so difficult and politically sensitive is that a whole industry has apparently grown up around cheap solar imports, to the point that the main solar benefit to the US economy today is from installation, not manufacturing. US companies and their employees build solar panel racks and other “balance of system” gear, finance rooftop and other solar projects, and construct these installations.

These companies could be at risk of losing business and shedding jobs, if a large tariff were imposed on imported solar cells, modules and panels. Those impacts might be less than feared, though, because the cost of the actual sunlight-converting PV hardware now makes up less than a third of total solar project costs. In other words, a tariff that doubled effective PV cost would drive up total solar costs to a much smaller degree, and least of all for residential solar, which has the highest total costs per kilowatt.

There’s another important aspect of this debate that hasn’t received much attention. If solar power is as important to our future energy diet as many think, then it should be no more desirable to become heavily reliant on China for our supplies of PV components than it did to depend on growing imports of Middle East oil. That was the main energy security issue for the US for the last 30 years, until the shale revolution unexpectedly reversed that trend. Relying on solar imports from China in the long run will be nothing like depending on Canada for the largest share of the petroleum the US still imports.

It also makes sense to address this situation now, before solar power has grown to 20% or 30% of the US electricity mix, and with the US economy near full employment, when those workers that did lose their jobs would have the best chance to replace them quickly.

From the start, the complaint of unfair competition lodged by Suniva Inc. and Solar World Americas–Chinese- and German-owned, respectively–has been derided as an effort to prop up a couple of marginal players at the expense of the much larger US solar-installation sector. That ignores the position of First Solar (NASDAQ:FSLR), a US-based PV manufacturer with $3 billion in global sales. The company is on record supporting the trade complaint. Of course they aren’t a disinterested party; they stand to benefit from a tariff that would raise the cost of competing PV gear from China and elsewhere.

That’s precisely the point of the complaint: strengthening US solar manufacturers, so that the growth of solar energy in this country doesn’t end up like TV sets and other consumer electronics. There’s more at stake, because PV isn’t TV. If solar power becomes a major part of US energy supplies by mid-century, it will actually matter if we have a robust manufacturing base to drive its deployment, rather than relying on any one country or region for its key building block.

Photo Credit: iamme ubeyou via Fickr

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Nathan Wilson's picture
Nathan Wilson on Feb 2, 2018

How do you include images in your comments? thanks.

Roger Arnold's picture
Roger Arnold on Feb 4, 2018

Just curious – do you think this chart will hold thru for the next 5-12 years?

Joe was addressing Mark, who posted the chart, but I’ll jump in.

I think the point is that whether the curves turn upward depends on progress in the three areas that enable intermittent renewables to deliver value. Those areas being energy storage, long distance transmission, and demand response (or discretionary loads, the term I prefer).

Those are now the pacing items. And yes, certainly, there’s movement in those areas. It just needs to be faster and more economical.

Mark Heslep's picture
Mark Heslep on Feb 5, 2018

Direct image url in the comment box seems to be rendered by the engine. Like so: (dot) jpg”

Indirect short urls and the like don’t work

Joe Deely's picture
Joe Deely on Feb 5, 2018


I don’t usually stray into international waters but I took a look at Mark’s source – BP Statistical Review – and came up with a chart showing recent annual generation increase for Solar, Wind and Nuclear.

In 2016 Wind generation increased by 131 TWh and Solar increased by 77 TWh. The total for both was 208TWh. This compares favorably to the best annual increase in nuclear – 238 TWh – which occurred in 1985. The 2016 increase in Nuclear was 41 TWh

Let’s see how numbers turn out for 2017 and beyond.

Images are currently suspended for comments – I’ll put up the chart once they get turned back on.

Mark Heslep's picture
Mark Heslep on Feb 5, 2018

My happy scenario for the US in 2030 is something like 20% wind, 15% solar, 10% hydro/bio/geo, 25% natgas, 13% coal, 17% nuclear (with nuclear slowly being decommissioned making it very difficult to progress with further decarbonization after 2030).

Jesper – Those shares of generation (20% wind, 15% solar, 38% fossil, 17% nuclear) suggests that, however likely, you consider them at least feasible with existing methods as a US 2030 scenario 12 years out. How so?

Given the US annual average electric load is ~450 GW, solar CF@20%, wind CF@32%, nuclear CF@92%, your 2030 scenario requires:

o Solar: 340 GW.
o Wind: 280 GW
o Nuclear: 80 GW

That is, in this national scenario occasionally some 0.6 TW of VRE will generate against 0.5 TW avg load with at least another 0.2 TW to 0.3 TW of must run power. Worse, the solar and wind build out will inevitably be concentrated in areas with favorable resource, with no feasible new transmission network in 12 yrs to move VRE power to less favorable areas.

Scenario 2030 requires a PV build rate of ~30 GW/yr, while 2017 installed US solar capacity was 12 GW/yr. Cost to tax revenues with the current 30% subsidy and $1.5/W-installed is $150B total, $15B/yr. The wind PTC @$21/MWh would rise to ~$15B/yr at full build out.

By contrast, the NREL Futures study in its 60% RE scenario (2050), has solar PV at 5%, which they manage with an unlikely 10X increase in biomass generation, 2X
increase in geothermal, and a 0.5X increase in hydro. Even the NREL 90% RE scenario does not reach 10% PV share.

As of 2017, the countries with large solar PV share of generation (Germany, Italy, Greece, Spain) have continued at a stagnated PV share since 2014, and the largest of these is at 8% PV (Italy), lending evidence to NREL’s PV model.

It seems a national PV share estimate of 15% solar is beyond unlikely, and only serves to encourage the mistaken notion that currently majority-share fossil power grids can become at least mostly clean power grids with declining nuclear.

Mark Heslep's picture
Mark Heslep on Feb 5, 2018

Those areas being energy storage, long distance transmission, and demand response (or discretionary loads, the term I prefer).

Yes, agree those three (at least), and I contend two more (below), though I disagree there’s significant movement in any of them; that is, at the level of current solar generation per country, i.e. 30-40 TWh/yr.

Transmission. Those five countries have the normal transmission activity ongoing; there is no major transmission build out. Projects have been proposed and stalled for years looking for RoW and not forthcoming.

Storage is mostly stagnant, with a couple PuHS projects on the EU continent. Battery storage remains insignificant. Several other long-talked-of storage tech programs like P2G2P have never moved beyond pilot, and so are at best decades away from moving solar into larger share.

Demand response has been around for decades with only incremental movement: when heavy industry invests large in some new power facility, they are want to run it as hard and long as possible, and not only at night when power is cheap. If industry is pushed, they can leave (and do).

Two more dependencies of intermittent power are visible: i) level of government subsidy, and ii) availability of affordable, fast ramp dispatchable thermal power. I doubt those EU countries can afford much more of i), i.e. FiT. They may find that building more ii) worthwhile, i.e. building more gas or biomass, or importing Scandinavian hydro. However, more dispatchable thermal means locking in dispatchable thermal, and at some point it appears cheaper to run than the cost of building more VRE (the point of the exercise). Also, in the EU gas is relatively expensive, and there’s only so much of Scandinavia.

So, in answer to Joe’s original question, no, I see no path to more solar share in those countries in the next 5-10 years without a major financial re-commitment by those governments (taxpayers and ratepayers).

Mark Heslep's picture
Mark Heslep on Feb 5, 2018

Joe – If you scale those increased TWh figures by population or GDP per builder nation, its not even close; nuclear increases output per capita far faster. That is, its well known that largest share of new solar-wind is out of China, with their large GDP (#1 or #2?), and 1500 million people. By contrast, France built their over 50 reactor fleet in a dozen years with under 60 million people.


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